July 11, 2017 > What is CIP and what does it do?
What is CIP and what does it do?
By William Marshak
Government-speak is filled with acronyms that can be confusing and, while helpful for those in the system to abbreviate discourse, can obscure the intent to those unfamiliar with the jargon. For many entities, the fiscal year ends June 30th and with the advent of a new year, budget items are revisited. Tri-City Voice asked City of Fremont Public Works Director Hans Larsen about a key budget element, the Capital Improvement Plan, often referred to as the CIP.
TCV: Why does the city have a Capital Improvement Program (CIP)?
Larsen: CIP is a five-year plan that addresses the cityÕs physical assets (i.e. infrastructure, buildings, roads, parks, etc.), reviewed every two years as opposed to the Operating Budget, approved annually, that primarily covers services (i.e. police, fire, park programs, planning, administration, etc.).
TCV: Why is the CIP a five-year plan?
Larsen: Many assets in the CIP take multiple years to plan, design, gain approvals, acquire land (if necessary) and construct or modify. Most involve multi-year investments. The first two years of the CIP represent the City CouncilÕs allocation of funds of the five-year plan. Years 3, 4 and 5 represent an intent or the amount of money necessary over a multi-year period to pursue a capital asset activity. All is subject to review on a two-year cycle.
TCV: Does the two-year review begin a new five-year cycle?
Larsen: Each review can roll investments forward for a new five-year period. However financial commitments are made primarily for the first two years.
TCV: Who creates the CIP?
Larsen: City Council has the final say but the CIP is developed by Staff and includes an estimate of funds that will be available. Public Works is the lead for the City but we are part of a team that looks at priorities and capital investments. The group process is led by the City ManagerÕs office with the Finance Department and other major city departments. Transportation funding comes under Public Works; Community Services manages park and landscape programs with the Recreation Commission to identify priorities. Public facilities involve many departments (e.g. fire, police, community centers) that occupy or are running services in city buildings.
Looking at the current CIP, about $190 million is allocated. Monies are either ÒrestrictedÓ and can only be used for a specific purpose, or Òunrestricted.Ó For example, gas tax money received from the federal, state and county (Measure BB) government can only be used for transportation purposes Ð some of it is more defined such as pavement maintenance. Most of the money received is for a specific purpose. About 13% is discretionary money transferred from the General Fund by the City Council and can be used for capital projects.
TCV: Does the CIP borrow money for projects?
Larsen: The new CIP does not borrow any money; it is pay as you go. There is some debt from previous commitments for public safety facilities. An annual payment of $850,000 is budgeted to retire that debt.
TCV: How flexible is the CIP?
Larsen: There may be occasions during a CIP cycle that offer unexpected opportunities such as approval of a grant. This can be presented to the City Council as a standalone item to amend the present CIP. On the other side, an emergency might demand expenditure of funds that were not allocated. The city council would have to make that decision. Adoption of the Vision Zero safety program is an example of special needs such as pedestrian countdown signals; we reallocated funds from other traffic signal investments to refocus on the Vision Zero program. There are funds in the program that remain unallocated such as park acquisition monies. For the most part, the CIP is designed to be stable.
TCV: Has the CIP increased? If so, why?
Larsen: Development activity has increased in Fremont and taxes collected have increased as well. As a function of the economy and development, resources have increased so we are able to do more. We are also receiving money from Alameda County Measure BB and recent State Gas Tax increase. We put this together with input regarding capital investment priorities from the community through the Open City Hall: #1 Traffic Congestion Management; #2 Traffic Safety improvements; #3 Street Maintenance and Repair. We have focused on increasing investments in these areas. We are fortunate that we have increased funding and can work on these priorities. The #4 priority was sidewalk repair and street maintenance; we have increased investment in that area with an expanded grant program for tree replacement and sidewalk repair.